Lockbox September 2016 Fund Update

Posted on September 22nd, 2016

September Market Update

Following over a month of very flat trading, September marked return of volatility to markets, albeit in jumps and starts. The first week of trading saw the market continue meandering laconically as was the trend through July and August. On September 9th, a cavalcade of Fed speakers were unleashed onto the public. Most notably, Boston Fed President Eric Rosengren put forth his view that there were serious risks to the economy if rates remain too low for too long. Many market participants took this as a very hawkish signal that raised the chances of an imminent Fed rate hike.

Also that Friday, Dallas Fed President Robert Kaplan and Fed Governor Daniel Tarullo also spoke more measuredly about the economy, putting forth signals that there was still room for debate on the timing of a Fed rate hike. And finally, it was also announced that Fed Governor Lael Brainard would be speaking publicly on the following Monday September 12th.

The sudden flurry of activity surrounding the Fed seemed to have jolted the market out of complacency and we saw all the indices fall through the floor that Friday, with the S&P punching down through the 2150 support level and closing at 2127, more than 50 points down from the previous day’s close.


Ultimately, the first two big events of September, the Bank of Japan and Federal Open Market Committee meetings came and went on September 21st. The BOJ revealed a new game plan to improve Japan’s stagnant economy via several new monetary tools. The Fed, as widely expected, kept rates the same while ratcheting up its stance that the timing for a rate hike was becoming ever more appropriate.

Following their meetings, markets have rebounded back up to the levels from the beginning of the month, suggesting the downturn was entirely do to jittery nerves ahead of the meetings.

Market Outlook

Over the next week, the market will need to find its footing to reestablish its trading range. Many traders and investors will be reentering trading positions or closing out protective hedges as the market shakes itself out. Based on the uptrend after the central bank meetings, the preliminary reading is that the market wants to get back to the same trading range it meandered through in July and August.

Any reading at the moment, however, will be complicated by the upcoming Presidential Debate between the candidates Hillary Clinton and Donald Trump on Monday, September 26th. Public and market perception of the performance of the two rivals could have some moving power on markets. We’ll have to watch and see to find out.

Lockbox Strategy Update

The abrupt change in market behavior ahead of the central bank meetings in September proved challenging to our trading. Based on the low volatility, over the previous months, we were forced to take much riskier positions to maintain our preferred level of cashflow. As a result, the downturn in early September forced some costly liquidations that set us back. Despite the difficulty, we have managed to remain on the positive side. With the rapids over, we should be able to post some gains to close out the month.